UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[X] Definitive Proxy Statement
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Powell Industries Inc.
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(Name of Registrant as Specified In Its Charter)
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POWELL INDUSTRIES, INC.
8550 MOSLEY DRIVE
HOUSTON, TEXAS 77075
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 15, 2002
To the Stockholders of Powell Industries, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of
Powell Industries, Inc., a Nevada corporation (the "Company"), will be held at
the offices of the Company at 8550 Mosley Drive, in Houston, Texas on Friday,
March 15, 2002 at 11:00 a.m. Houston time, for the following purposes:
1. To elect two (2) members of the Company's Board of Directors, with
terms to expire in 2005; and
2. To approve the Company's Non-Employee Directors Stock Option Plan
as amended by the Company's Board of Directors on January 18, 2002.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The stock transfer books will not be closed. Stockholders of record as of
the close of business on February 1, 2002 are entitled to notice of, and to vote
at, the Annual Meeting or any adjournment thereof, notwithstanding any transfer
of stock on the books of the Company after such record date.
You are cordially invited to attend the meeting in person. YOU ARE URGED TO
COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND TO RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
By Order of the Board of Directors
/s/ THOMAS W. POWELL
------------------------------------
Thomas W. Powell
Chairman and Chief Executive Officer
Houston, Texas
January 31, 2002
POWELL INDUSTRIES, INC.
8550 MOSLEY DRIVE
HOUSTON, TEXAS 77075
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PROXY STATEMENT
JANUARY 31, 2002
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MARCH 15, 2002
---------------------
SOLICITATION AND VOTING RIGHTS
The accompanying proxy is solicited by the Board of Directors of Powell
Industries, Inc., a Nevada corporation (the "Company"), for use at the Annual
Meeting of Stockholders of the Company to be held on Friday, March 15, 2002 at
11:00 a.m., Houston time, at the offices of the Company at 8550 Mosley Drive, in
Houston, Texas, or at any adjournment thereof.
This Proxy Statement and proxy and the accompanying Notice of Annual
Meeting, Summary Annual Report to Stockholders, and Form 10-K for the year ended
October 31, 2001, including consolidated financial statements, will be mailed to
stockholders on or about February 15, 2002. The cost of soliciting proxies in
the enclosed form will be borne by the Company. The Board of Directors of the
Company has fixed February 1, 2002, as the record date for determination of
stockholders entitled to receive notice of and to vote at the Annual Meeting. As
of January 31, 2002, there were 10,457,194 shares of the Company's Common Stock,
par value $.01 per share ("Common Stock"), outstanding. Each holder of Common
Stock will be entitled to one vote for each share owned, except as noted below.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company is necessary to constitute a
quorum at the meeting. The holders of shares represented by proxies reflecting
abstentions or "broker non-votes" are considered present at the meeting and
count toward a quorum. Brokers holding shares of record for their customers
generally are not entitled to vote on certain matters unless they receive voting
instructions from their customers. When brokers complete proxy forms, they
generally vote on those matters as to which they are entitled to vote. On those
matters as to which brokers are not entitled to vote without instructions from
their customers and have not received such instructions, brokers generally
indicate on their proxies that they lack voting authority as to those matters.
As to those matters, such indications are called "broker non-votes".
The persons receiving the greatest number of votes cast at the meeting to
fill the directorships with terms to expire in 2005 will be elected as directors
of the Company, class of 2005. Thus, abstentions and broker non-votes will have
no effect on the election of directors.
Regarding other matters, the vote of a majority of the voting power
present, in person or by proxy, and entitled to vote on the matters, at a
meeting at which a quorum is present, is the act of the stockholders.
Accordingly, abstentions will have the effect of negative votes with respect to
any such other matters. Broker
non-votes will have the effect of negative votes as to any such other matters as
to which the broker is entitled to vote, and no effect on those matters as to
which the broker is not entitled to vote.
The shares represented by each valid proxy received by the Company on the
form solicited by the Board of Directors will be voted in accordance with
instructions specified on the proxy. Under Nevada law, a stockholder giving a
duly executed proxy may revoke it before it is exercised only by filing with or
transmitting to the Secretary of the Company an instrument or transmission
revoking it, or a duly executed proxy bearing a later date.
COMMON STOCK OWNED BY
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth as of January 31, 2002 (except as otherwise
noted below), the number of shares of Common Stock owned by each person who is
known by the Company to own beneficially more than five percent (5%) of the
Company's outstanding Common Stock:
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
------------------- ----------------- ----------------
Thomas W. Powell...................................... 3,037,375(1) 29.05%
P.O. Box 12818
Houston, Texas 77217
Bonnie L. Powell...................................... 869,419(2) 8.31%
P. O. Box 112
Warda, Texas 78960
Fidelity Management & Research Co. ................... 844,000(3) 8.07%
82 Devonshire Street
Boston, Massachusetts 02109
Kern Capital Management, LLC.......................... 762,300(4) 7.29%
114 West 47th Street, Suite 1926
New York, New York 10036
Wellington Trust Company, NA.......................... 653,500(5) 6.25%
75 State Street
Boston, Massachusetts 02109
Klein Bank............................................ 696,156(6) 6.66%
Trustee of the Powell Industries, Inc.
Employee Stock Ownership Trust
and of the Powell Industries, Inc.
Frozen Employee Stock Ownership Trust
13845 Breck
Houston, Texas 77066
---------------
(1) Mr. Powell has sole voting power and sole investment power with respect to
2,638,512 of such shares. Of those 2,638,512 shares, 78,720 are held by Mr.
Powell's IRA, and 2,523,792 are held by TWP Holdings,
2
Ltd., a partnership controlled by Mr. Powell. Also includes 317,360 shares
held by the Thomas Walker Powell Trust. Mr. Powell is a co-trustee of such
trust and shares voting and investment power with respect to the shares held
by such trust with the other co-trustees, Michael W. Powell and Holly C.
Powell Arnold. Also includes 2,664 shares allocated to the account of Mr.
Powell under the Powell Industries, Inc. Employee Stock Ownership Plan (see
footnote (6) to this table) and 919 shares held in trust for the account of
Mr. Powell under the Employees Incentive Savings Plan of the Company. Aetna
Trust Company, FSB is the sole trustee of the Employees Incentive Savings
Plan and as such has sole power to vote such shares as directed by the
administrative committee of the Plan. All data in this Proxy Statement with
respect to shares held in the Employees Incentive Savings Plan are as of
October 31, 2001. Also includes 77,920 shares subject to stock options which
are currently exercisable by Mr. Powell.
(2) Mrs. Powell has sole voting power and sole investment power with respect to
523,919 of such shares. Also includes 345,500 shares held by Testamentary
Trust No. 1, of which Mrs. Powell is a co-trustee. Mrs. Powell shares voting
and investment power with respect to such shares held by Testamentary Trust
No. 1 with J. Suzzanne May, the other co-trustee of such trust. Any act of
such co-trustees requires the approval of a majority of them.
(3) The shares set forth in the Schedule reflect the number of shares owned on
January 31, 2002 according to the records of the Company's Stock Transfer
Agent. As of December 31, 2000, based on a Schedule 13G dated February 14,
2001 filed by FMR Corp., the parent of Fidelity Management & Research
Company owned beneficially 838,600 shares or 8.02% of the common stock of
Powell Industries, Inc. According to such Schedule 13G, such stock is held
on behalf of Fidelity Low-Priced Stock Fund. Also according to such Schedule
13G, such Fund's Board of Trustees has the sole power to vote or direct the
voting of such shares, and each of such Fund, FMR Corp., and Edward C.
Johnson 3d, Chairman of FMR Corp., has the sole power to dispose of such
shares.
(4) The shares set forth in the Schedule reflect the number of shares owned on
January 31, 2002 according to the records of the Company's Stock Transfer
Agent. As of October 31, 2001, based on a Schedule 13G dated November 9,
2001, filed by Kern Capital Management, LLC, Robert E. Kern, Jr. and David
G. Kern, Kern Capital Management, LLC owned beneficially 1,082,500 shares or
10.35% of the Common Stock of Powell Industries, Inc.
(5) The shares set forth in the Schedule reflect the number of shares owned on
January 31, 2002 according to the records of the Company's Stock Transfer
Agent. As of December 31, 2000, based on a Schedule 13G dated February 14,
2001, filed by Wellington Management Company, LLP, the parent of Wellington
Trust Company, NA, Wellington Management Company, LLP owned beneficially
850,000 shares with shared dispositive power over all such shares and shared
voting power as to 530,000 of such shares.
(6) The shares set forth in the Schedule reflect the number of shares owned on
January 31, 2002 according to the records of the Company's Stock Transfer
Agent. Of such shares, 668,691 are held in the Powell Industries, Inc.
Employee Stock Ownership Trust (the "ESOP") and 27,465 are held in the
Powell Industries, Inc. Frozen Employee Stock Ownership Trust (the "Frozen
ESOP"). Klein Bank, as Trustee, but as directed by the administrative
committee for the ESOP appointed by the Board of Directors of the
Corporation, votes and disposes of shares not allocated to the accounts of
participants, and allocated shares as to which no direction is received from
the participant. Participants have the right to direct the voting and tender
of shares allocated to their accounts. As of October 31, 2001, approximately
292,001 of the shares held by the ESOP were allocated to the accounts of
participants. An additional 44,863 shares
3
will be allocated to the accounts of participants effective December 31,
2001, but the amount of this latter allocation to each participant has not
been determined as of the date of this Proxy Statement. Accordingly, such
shares to be allocated as of November 30, 2001 are not included in the
number of shares shown as owned by executive officers in this proxy
statement. All shares held in the Frozen ESOP have been allocated to
accounts of participants. Except as otherwise specified, all data in this
Proxy Statement with respect to shares held in either the ESOP or the Frozen
ESOP are as of November 30, 2001. As of December 31, 2000, based on a
Schedule 13G dated February 14, 2001, filed by Klein Bank, as Trustee for
the Powell Industries, Inc. Employee Stock Ownership Trust and the Powell
Industries, Inc. Frozen Employee Stock Ownership Trust ("Trusts") Klein Bank
owns beneficially 702,900 shares with shared dispositive power and voting
power over all such shares.
The following table sets forth, as of January 31, 2002, except for plan
share data (see footnotes (1), (2) and (6) to the preceding table), the number
of shares of the Common Stock beneficially owned by each director and nominee
for director, each of the executive officers listed in the Summary Compensation
Table below, and all executive officers and directors of the Company as a group.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------ ----------------- --------
Joseph L. Becherer......................................... 3,000 *
Eugene L. Butler........................................... 4,500 *
James F. Clark............................................. 1,000 *
Robert B. Gregory.......................................... 6,398 *
Don R. Madison............................................. 0 *
Bonnie L. Powell........................................... 869,419(2) 8.31%
Thomas W. Powell........................................... 3,037,375(3) 29.05%
Stephen W. Seale, Jr. ..................................... 3,000(4) *
Lawrence R. Tanner......................................... 2,929 *
Robert C. Tranchon......................................... 2,100 *
Ronald J. Wolny............................................ 8,434 *
M.M. Zeller................................................ 52,552(5) *
All Executive Officers and Directors as a group (12
persons)................................................. 3,995,921
---------------
* Less than one percent (1%).
(1) The persons listed have sole voting power and sole investment power with
respect to the shares beneficially owned by them, except as otherwise
indicated.
(2) See footnote (2) to the preceding table.
(3) See footnote (1) to the preceding table.
(4) Such shares are held by Seale Land & Cattle Co., an unincorporated business
controlled by Mr. Seale.
(5) Mr. Zeller has sole voting and investment power over 13,200 of such shares.
Also includes 2,452 shares allocated to Mr. Zeller's account in the ESOP.
See footnote (6) to the preceding table. Also includes 36,900 shares subject
to stock options which are currently exercisable by Mr. Zeller.
4
ELECTION OF DIRECTORS
The terms of three directors expire in 2002 under the bylaws of the
Company. The terms of the remaining directors continue after the Annual Meeting.
The Board of Directors has nominated Eugene L. Butler and Ronald J. Wolny for
election as directors with terms to expire in 2005. Mr. Butler and Mr. Wolny
currently serve as directors of the Company with terms expiring in 2002.
Although the Board of Directors does not contemplate that any nominee will be
unable to serve, if such a situation arises prior to the Annual Meeting, the
persons named in the enclosed form of proxy will vote in accordance with their
best judgment for a substitute nominee.
The following table sets forth for each nominee and for each director whose
term of office continues after the Annual Meeting, his name, age, principal
occupation and employment for the past five years, offices held with the
Company, the date he first became a director, and the date of expiration of his
current term as director.
PRINCIPAL OCCUPATION FOR DIRECTOR TERM
NOMINEE AGE PAST FIVE YEARS(1) OFFICES HELD WITH COMPANY SINCE EXPIRES
------- --- ------------------------ ---------------------------- -------- -------
Thomas W. Powell............ 61 Chairman of the Board, Director 1984 2004
President and Chief Chairman of The Board,
Executive Officer of the President and Chief
Company since 1984 Executive Officer(2)
Lawrence R. Tanner.......... 75 Director, Technical Director 1992 2004
Services for Compaq
Computer Company
Joseph L. Becherer.......... 59 Retired; previously, Director 1997 2004
Senior Vice President of
Eaton Corporation,
September 1995 to
October 1997 with
responsibility for the
Cutler Hammer Group;
Operations Vice
President of Cutler
Hammer, a subsidiary of
Eaton Corporation,
February 1994 to
September 1995
Stephen W. Seale, Jr. ...... 62 Retired; previously Director 1985 2003
Director-Operations,
Materials and Structures
Division and other
assignments at Southwest
Research Institute, an
independent research and
development
organization, until
January 1998
5
PRINCIPAL OCCUPATION FOR DIRECTOR TERM
NOMINEE AGE PAST FIVE YEARS(1) OFFICES HELD WITH COMPANY SINCE EXPIRES
------- --- ------------------------ ---------------------------- -------- -------
Robert C. Tranchon.......... 61 President and CEO, Director 2000 2003
Reveille Technology, a
manufacturing system
software development and
consulting firm, 1995 to
present; President, CEO,
and Director of Ansaldo
Ross Hill, a
manufacturer of drives,
motors, and automation
systems, 1997 to
present; independent
consultant, 1995-1996;
previously President,
CEO and Chairman of the
Board of Directors of
Westinghouse Motor
Company
James F. Clark.............. 54 Vice President, Square D Director 2001 2003
Corporation from 1989
until his retirement in
December, 2000(3)
Eugene L. Butler............ 60 Chairman of the Board, Director 1990 2002
Intercoastal Terminal,
Inc. since 1991
Ronald J. Wolny............. 62 Vice President, Fluor Director 2001 2002
Daniel, Inc. since
October 1, 1968; Member
of the Board of
Directors Fluor Daniel
Nigeria from 1990 to
2000; Member of the
Board of Directors of
the Company from March,
1992 to June, 1998
---------------
(1) None of the corporations listed (other than the Company) is an affiliate of
the Company.
(2) Mr. Powell also serves as a director of each subsidiary of the Company.
(3) Mr. Clark was appointed by the Board of Directors at its June 15, 2001
meeting to fill a vacancy in the class of 2003.
Only the directors who are not employees of the Company or any of its
subsidiaries or affiliates are entitled to receive a fee, plus reimbursement of
out-of-pocket expenses, for their services as directors. Under
6
the Company's standard arrangement for compensation of directors, outside
directors receive a quarterly retainer of $2,000 and a fee of $2,000 for each
board meeting attended. Members of a committee other than the chairman receive a
fee of $600 for attending each committee meeting. Committee chairmen receive
$1,000 for attending each committee meeting.
In 1993, the Company adopted the Powell Industries, Inc. Directors' Fee
Program which permits directors to defer receipt of the directors' fees to which
they would otherwise be entitled and to have such deferred fees allocated to a
shadow account as if they were invested in Common Stock of the Company on the
date the fees were payable. Then upon expiration of the deferral period or the
retirement or death of the director, payment will be made in the form of shares
of Common Stock equal to the number of shares in his shadow account (plus any
distributions on the Common Stock that were credited to the shadow account).
In 2000, the Company adopted the 2000 Non-Employee Director Stock Option
Plan. The Board of Directors reserved 24,000 shares of Common Stock for issuance
under the Plan. The Plan is administered by the Board of Directors. Eligibility
to participate in the Plan is limited to those individuals who are members of
the Board of the Company and who are not an employee of the Company or any
affiliate of the Company. The Plan became effective on June 25, 2000. Options
have been issued to each of the non-employee directors to acquire shares of the
Company's common stock in accordance with the terms of the Plan.
Four meetings of the Board of Directors were held in the last fiscal year.
No incumbent director attended fewer than seventy-five percent (75%) of the
aggregate of (1) the total number of meetings of the Board of Directors and (2)
the total number of meetings held by all committees of the Board on which he or
she served, except for Mr. Clark who was appointed to the Board on June 15,
2001.
The Board of Directors has a standing Audit Committee which met four times
during the last fiscal year. The Audit Committee consists of Messrs. Butler,
Seale and Tanner. The Audit Committee has the responsibility to assist the Board
of Directors in fulfilling its fiduciary responsibilities as to accounting
policies and reporting practices of the Company and its subsidiaries and the
sufficiency of the audits of all Company activities. It is the Board's agent in
ensuring the integrity of financial reports of the Company and its subsidiaries,
and the adequacy of disclosures to shareholders. The Audit Committee is the
focal point for communication between other directors, the independent auditors,
internal auditors and management as their duties relate to financial accounting,
reporting, and controls. During fiscal 2000, the Board of Directors adopted an
Audit Committee Charter which was attached as Appendix A to the Proxy Statement
for the Company's Annual Meeting of Stockholders held on March 16, 2001, a copy
of which Audit Committee Charter may be obtained at the offices of the Company
in Houston, Texas. The current members of the Audit Committee are "independent"
as that term is defined by Rule 4200(a)(15) of the listing standards of the
National Association of Securities Dealers. All meetings of the Audit Committee
were separate and apart from meetings of the full Board of Directors during
fiscal 2001.
AUDIT COMMITTEE REPORT
The Audit Committee has (1) reviewed the Company's audited financial
statements for fiscal 2001 and discussed them with Management, (2) discussed
with the Company's independent accountant the matters required to be discussed
by Statement of Auditing Standard 61, as amended, (3) received written
disclosures and a letter from the Company's independent accountants required by
Independence Standards Board Statement No. 1, and (4) discussed the independence
of the Company's accountants with the accountants.
7
Based on the foregoing discussions, the Audit Committee recommended to the
Company's Board of Directors that the Company's audited financial statements be
included in its annual report on Form 10-K for the year ended October 31, 2001.
The Audit Committee:
Eugene L. Butler
Stephen W. Seale, Jr.
Lawrence R. Tanner
The Board of Directors also has a standing Compensation Committee comprised
of Mr. Becherer, Mr. Wolny and Mr. Tranchon, all of whom are nonemployee
directors of the Company. The Compensation Committee, which held three meetings
during the last fiscal year, provides oversight on behalf of the full Board on
development and administration of the Company's executive compensation program
and each component plan in which officers and directors are eligible to
participate. The Compensation Committee also administers the Stock Option Plan,
the Director's Fee Program, Incentive Compensation Plan and the 2000
Non-Employee Director Stock Option Plan of the Company.
The Board of Directors does not have a standing nominating committee.
EXECUTIVE OFFICERS
The following table provides information regarding the executive officers
of the Company who are not also a director or a nominee for director. The
officers of the Company serve at the discretion of the Board of Directors of the
Company.
NAME AGE SINCE POSITION
---- --- ----- --------
Robert B. Gregory..... 46 2000 Controller of Company
Don R. Madison(1)..... 44 2001 Vice President and Chief Financial
Officer of Company
M. M. Zeller(2)....... 61 1990 Vice President of Company and President
of Powell Electrical Manufacturing
Company ("PEMCO")
---------------
(1) Mr. Madison was appointed vice president and chief financial officer of the
Company by the Board of Directors at its September 7, 2001 meeting which
appointment became effective on October 1, 2001. For more than five years
prior to joining the Company, Mr. Madison served in several capacities with
ABB, Inc. including vice president for finance.
(2) Mr. Zeller was appointed vice president of the Company by the Board of
Directors at its January 18, 2002 meeting which appointment became effective
on that date. This appointment is in addition to Mr. Zeller's position as
president of PEMCO, a wholly owned subsidiary of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer of the Company, and of the Company's
most highly compensated executive officers for the last fiscal
8
year (other than the CEO) whose total annual salary and bonus exceeded $100,000,
for each of the Company's fiscal years ending October 31, 2001, October 31,
2000, and October 31, 1999.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(1) (#) ($)(2)
--------------------------- ---- --------- -------- ---------- ---------- ------------
Thomas W. Powell.................. 2001 335,000 256,095 0 42,500 56,408(3)
CEO of Company 2000 315,000 0 6,000 0 53,310(3)
1999 315,000 0 0 47,800 73,478(3)
Robert B. Gregory................. 2001 110,000 40,695 0 7,500 3,300
Controller of Company 2000 94,600 7,750 0 0 2,800
1999 84,000 6,300 0 5,000 2,500
M.M. Zeller....................... 2001 210,000 200,000 0 20,000 14,100
Vice President of Company 2000 195,326 83,467 520 0 14,100
and President of PEMCO 1999 191,000 0 0 20,000 13,800
Don R. Madison(4)................. 2001 14,583 47,500 750
Vice President and CFO of
Company
---------------
(1) As of October 31, 2001, the aggregate number of shares of restricted stock
held by named executive officers of the Company was 6,520, and the value of
such shares as of such date was $138,000. These officers have the right to
receive dividends with respect to such restricted stock awards to the extent
dividends are paid generally on the Common Stock. However, the Company has
not previously paid dividends and it is not anticipated that dividends will
be paid in the immediate future. Such awards were made to these officers in
connection with their exercise of stock options granted by the Company,
pursuant to a provision in the stock option agreement designed to encourage
retention of shares received upon exercise of options.
(2) In addition to the items noted below with respect to Mr. Powell, the amounts
in this column include contributions matched by the Company for the
Employees Incentive Savings Plan (401(k) plan), estate planning and
automobile allowance.
(3) Of this amount, $28,229 for all years were premiums paid by the Company with
respect to life insurance for the benefit of Mr. Powell.
(4) Mr. Madison was appointed vice president and chief financial officer of the
Company by the Board of Directors at its September 7, 2001 meeting and
assumed his duties on October 1, 2001.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ON EXERCISE REALIZED AT OCTOBER 31, 2001(#) OCTOBER 31, 2001($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------------ -------------------------
Thomas W. Powell........ -- -- 77,920/76,880 892,115/534,372
M. M. Zeller............ -- -- 36,900/34,600 433,862/233,068
Robert B. Gregory....... -- -- 3,200/800 42,596/67,424
Don R. Madison.......... -- -- 0/10,000 0/0
Each of the named executive officers is covered by the Company's Executive
Severance Protection Plan, which provides severance pay and other specified
benefits upon termination of employment other than for cause (as defined in the
Plan) within three years of a change in control of the Company. The benefits
payable in such event (grossed up for taxes) are (1) three times the officer's
current annual base salary, plus (2) three times the maximum incentive
opportunity for the officer under the Company's then current Incentive
Compensation Plan, plus (3) continuation of medical, dental, and life insurance
benefits for three years or until the officer is covered under another plan,
whichever is earlier.
Thomas W. Powell is covered by the Company's Executive Benefit Plan.
Pursuant to Mr. Powell's Executive Benefit Agreement executed under such Plan,
he is entitled to the following payments: (1) if he should die while in active
employment with the Company, a lump sum benefit of $630,000 payable to his
designated beneficiary; (2) upon normal retirement on or after age 65 and the
completion of at least ten years of continuous employment, salary continuation
payments of $150,000 per year for five years and then $75,000 per year for ten
years; (3) upon termination of employment prior to qualifying for normal
retirement but after attaining age 55 and the completion of at least ten years
of continuous employment with the Company, the salary continuation payments
payable upon normal retirement, reduced by 1/2% for each month prior to age 65
that employment is terminated, commencing on the later of the date of retirement
or attainment of age 60; and (4) upon a sale of all or substantially all of the
property and assets of the Company other than in the usual course of its
business, or a merger of the Company wherein the Company is not the surviving
corporation, and within two years thereafter Mr. Powell's employment with the
Company is terminated or he resigns following a change of his position to one of
less responsibility, Mr. Powell would be entitled to receive salary continuation
payments of $150,000 per year for five years and then $75,000 per year for ten
years. If Mr. Powell entered into competition with the Company following
termination or retirement described in (3) above, he would (a) forfeit all
further payments if the competition occurred within 36 months following
termination, or (b) not be entitled to any further payments until age 60, if the
competition occurred after 36 months following termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year of the Company, Joseph L. Becherer, Ronald J.
Wolny, and Robert C. Tranchon served on the Compensation Committee of the Board
of Directors of the Company. None of them has ever served as an officer or
employee of the Company or any of its subsidiaries. Also, during the last fiscal
year, no executive officer of the Company served as a member of the Compensation
Committee or Board of Directors of another entity, one of whose executive
officers served on the Company's Board of Directors.
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of your Board of Directors is
pleased to present to the shareholders its annual report on executive
compensation. This report summarizes the responsibilities of the Committee, the
compensation policy and objectives that guide the development and administration
of the executive compensation program, each major component of the program, and
the basis on which the compensation for the Chief Executive Officer, corporate
officers and other key executives was determined for the fiscal year ended
October 31, 2001.
The Compensation Committee, at the June 15, 2001 meeting of the Board of
Directors, recommended that Directors Wolny and Clark be granted options under
the Non-Employee Director Stock Option Plan, which grants were approved by the
Board of Directors, subject to the approval of the shareholders of the Non-
Employee Director Stock Option Plan, as amended. The Compensation Committee also
recommended that the Plan Asset Account which was included as a part of the
Corporation's 401(k) Plan be amended and unfrozen and that the frozen ESOP be
terminated which recommendation was approved by the Board of Directors.
The Compensation Committee, which held three meetings during the last
fiscal year, provides oversight on behalf of the full Board on development and
administration of the Company's executive compensation program and each
subcomponent plan under which officers or directors are eligible to participate.
The Compensation Committee also administers the Stock Option Plan, Directors Fee
Program, Incentive Compensation Plan and the Non-Employee Director Stock Option
Plan of the Company.
Executive Compensation Philosophy
The philosophy of the Committee is that the Company's executive
compensation program should be an effective tool for fostering the creation of
shareholder value. The following objectives guide the Committee in its
deliberations:
- Provide a competitive compensation program that enables the Company to
attract and retain key executives and Board members.
- Assure a strong relationship between the performance results of the
Company or subsidiary and the total compensation received.
- Balance both annual and longer performance objectives of the Company.
- Encourage executives to acquire and retain meaningful levels of Common
Stock of the Company.
- Work closely with the Chief Executive Officer to assure that the
compensation program supports the management style and culture of the
Company.
In addition to normal employee benefits, the executive total compensation
program includes base salary, annual cash incentive compensation, and
longer-term stock based grants and awards.
Comparisons are made and surveys taken periodically to determine
competitive compensation levels and practices for certain benchmark positions in
the Company. Such analysis covers a broad group of manufacturing companies and
the results are adjusted for differences in factors such as company size and
position responsibilities. This comparison group is broader than the published
industry index of companies included in
11
the cumulative total return performance graph presented elsewhere in this Proxy
Statement because it is more representative of the executive market in which the
Company competes for talent and provides a consistent and stable market
reference from year to year. Other comparative information from national survey
databases, proxy statement disclosures, and general trend data provided by
compensation consultants is also considered.
Variable incentives, both annual and longer term, are important components
of the program and are used to link pay and performance results. Variable
incentive awards and performance standards are calibrated such that total
compensation will generally approximate the market 50th percentile when Company
performance results are at target levels which approximate the recent historical
performance of the Company (subject to certain minimum target levels), and will
exceed the 50th percentile when performance exceeds targets. However, changes in
the mission and strategy of the Company or certain of its subsidiaries as well
as projected profit and growth are also important considerations in the
calibration of the Company's total executive compensation program.
The Internal Revenue Code (Section 162(m)) imposes a $1,000,000 limit, with
certain exceptions, on the deductibility of compensation paid to each of the
five highest paid executives. In particular, compensation that is determined to
be "performance based" is exempt from this limitation. To be "performance
based," incentive payments must use predetermined objective standards, limit the
use of discretion in making awards, and be certified by the Compensation
Committee made up of "outside directors." While the Committee believes that the
use of discretion is appropriate in specific circumstances, it believes that the
annual incentive compensation and longer term stock plans comply with the
provisions of Section 162(m) as "performance based". It is not anticipated that
any executive will receive compensation in excess of this limit during fiscal
year 2002. The Committee will continue to monitor this situation and will take
appropriate action if it is warranted in the future.
Following is a discussion of each of the principal components of the
executive total compensation program.
BASE SALARY
The base salary program targets the median of the primary comparison group
for corporate officers and managers. Since subsidiary presidents generally have
a higher incentive opportunity relative to comparable positions in the market,
base salaries for subsidiary presidents are targeted somewhat below the market
median. Each executive's base salary is reviewed individually each year. Salary
adjustments are based on the individual's experience and background, performance
during the prior year, the general movement of salaries in the marketplace, and
the Company's financial position. Due to these factors, an executive's base
salary may be above or below the target point at any point in time.
ANNUAL INCENTIVE COMPENSATION
The Company administers an annual incentive plan for its corporate officers
and managers, and subsidiary presidents and selected subsidiary managers. The
goal of the plan is to reward participants in proportion to the performance of
the Company and/or the subsidiary for which they have direct responsibility, and
their individual contributions to the Company's performance.
The amount of annual incentive compensation each participant is eligible to
earn varies based on his potential contribution to the future performance of his
subsidiary or the Company. The amount of such
12
compensation actually earned by each participant is based on the actual
financial performance of his subsidiary or the Company for the year compared to
profit and growth target ranges which are set at the beginning of that year.
Historical performance, current mission and strategy, and projected profit and
growth capability are considered in setting the targets for each subsidiary and
the Company.
STOCK BASED COMPENSATION
Stock ownership is encouraged through the use of a stock plan that provides
for the grant of stock options and stock awards. Stock option grants are made on
a periodic basis (typically every other year) and are based on competitive
multiples of base salary. Senior executives typically have a higher multiple
and, as a result, have a greater portion of their total compensation linked to
the longer term success of the Company. In determining the appropriate grant
multiples, the Company targets the market median among publicly held
manufacturing companies of similar size. To encourage stock retention,
participants who retain the shares obtained through the exercise of an option
receive a restricted stock award equal to one additional restricted share for
every five option shares retained for five years from the date they were
acquired.
Compensation of the Chief Executive Officer
The Chief Executive Officer, Mr. Thomas W. Powell, participates in the
executive compensation program described in this report.
In establishing the total compensation program for Mr. Powell, the
Committee assessed the pay levels for CEOs in similar companies in the
manufacturing industry and the profit performance of the Company.
Respectfully submitted,
The Compensation Committee of the Board of Directors
Joseph L. Becherer, Chairman
Ronald J. Wolny
Robert C. Tranchon
13
PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG POWELL INDUSTRIES, INC.,
NASDAQ MARKET INDEX AND PUBLISHED INDUSTRY INDEX
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------------------------
10/31/1996 10/31/1997 10/30/1998 10/29/1999 10/31/2000 10/31/2001
--------------------------------------------------------------------------------------------------
Powell Ind Inc 100.00 140.48 88.10 72.62 104.17 201.81
Industrial
Electrical Eqp 100.00 161.43 132.77 167.06 211.21 120.80
NASDAQ Market Index 100.00 131.06 148.19 244.59 287.67 144.26
Assumes $100 Invested On October 31, 1996
Assumes Dividends Reinvested
Fiscal Year Ended October 31, 2001
14
PROPOSAL TO APPROVE THE
POWELL INDUSTRIES, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
GENERAL
The Board of Directors at its meeting on June 25, 2000 adopted a Stock
Option Plan (the "Plan") for the benefit of members of the Board of Directors of
the Company who, at the time of their service, are not employees of the Company
or any of its affiliates. The Board believes that providing them an opportunity
to become owners of the Common Stock of the Company is in the best interest of
the Company. The Plan was adopted and initially funded with 24,000 shares of the
Company's Common Stock. To enable the Company to continue to provide
Non-Employee Directors an opportunity to acquire a proprietary interest in the
Company through the acquisition of its Common Stock, the Board amended the Plan
on January 18, 2002 to, among other things, increase the maximum number of
shares that may be issued under the Plan to 100,000 and seeks shareholder
approval of the Plan as amended. The Company believes this Plan is an important
incentive to its directors to continue their service to the Company as well as
an important incentive to attract highly qualified individuals to serve as
directors of the Company in future years.
DESCRIPTION OF THE PLAN
The description of the principal provisions of the Plan set forth herein is
intended solely as a summary and is subject to and qualified by the full text of
the Plan. A copy of the Plan as amended is attached as Appendix A to this Proxy
Statement. The principal features of the Plan are as follows:
Administration. The Plan is administered by the Compensation Committee
subject to approval of the Board of Directors.
Eligibility. Those individuals who shall be eligible to receive options
under the Plan shall be a member of the Board of Directors of the Company who
are not employees of the Company or any affiliate of the Company ("Eligible
Director").
Amount and Date of Option Grants. If shares are available under the Plan,
on a date established by the Compensation Committee as administrator of the
Plan, each Eligible Director who is continuing to serve as a Director after such
date shall receive a grant of an option to purchase 2,000 shares of the
Company's Common Stock. If an Eligible Director is first elected or appointed to
the Board of Directors after such date but before the next such date, then such
Eligible Director shall be granted an option to purchase the number of shares of
stock proportionately adjusted for the actual time served before the next such
date.
Purchase Price. The price at which shares of stock may be purchased by
each Eligible Director pursuant to any grant under the Plan shall be the fair
market value of the shares of stock on the date of the grant.
Duration and Vesting of Options. The term of each option granted under the
Plan shall be seven years from the date of grant, and each option shall be
exercisable in full after the first anniversary of the grant of the option.
15
APPROVAL
Pursuant to the resolution of the Board of Directors approving the
amendment to the Plan, the Plan as amended will not become effective until it is
approved by the holders of a majority of the shares of voting stock of the
Company present and entitled to vote at a meeting of the stockholders of the
Company at which a quorum is present.
The Board of Directors recommends a vote FOR approval of the Plan, as
amended.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater-than ten percent stockholders are required by
the regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on the Company's review of the copies of such forms received
by it, or written representations from certain reporting persons that no Form 5
reports were required for those persons, the Company believes that all filing
requirements applicable to its officers and directors and greater-than ten
percent beneficial owners during the 2001 fiscal year were complied with.
INDEPENDENT AUDITORS
Arthur Andersen LLP has served as the principal accountants for the Company
for the fiscal year ending October 31, 2001. Representatives of such firm are
expected to be present at the Annual Meeting of Stockholders. They will have the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
AUDIT FEES
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended October 31, 2001 and for the reviews of the financial
statements included in the Company's quarterly reports on Form 10-Q for the same
fiscal year were $290,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Arthur Andersen LLP for professional services
rendered for information technology services related to financial information
systems design and implementation for the fiscal year ended October 31, 2001.
ALL OTHER FEES
The aggregate fees billed by Arthur Andersen LLP for services other than
the services described under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees" above, for the fiscal year
16
ended October 31, 2001 were $130,300, which amount included, among other things,
fees for general and specific tax work and tax advice and review of the
Company's benefit plans.
The Audit Committee has considered whether the provision of non-audit
services by Arthur Andersen LLP is compatible with maintaining the independent
auditor's independence. It is the judgment of the Audit Committee that the level
of effort and mix of professional services does not constitute a conflict of
interest and therefore does not compromise the auditor's independence.
OTHER MATTERS
As of the date of this statement, the Board of Directors has no knowledge
of any business which will be presented for consideration at the meeting other
than the election of two directors of the Company and the approval of the
Company's Non-Employee Directors Stock Option Plan Should any other matters be
properly presented, it is intended that the enclosed proxy will be voted in
accordance with the best judgment of the persons voting the matter.
ANNUAL REPORT
A Summary Annual Report to Stockholders and an Annual Report on Form 10-K
covering the fiscal year of the Company ended October 31, 2001 are enclosed
herewith. These reports do not form any part of the material for solicitation of
proxies.
STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the Annual Meeting of
Stockholders to be held in 2003 must be received at the office of the Secretary
of the Company no later than October 3, 2002 in order to be included in the
Company's proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors
/s/ THOMAS W. POWELL
--------------------------------------
Thomas W. Powell
Chairman and Chief Executive Officer
Dated: January 31, 2002
17
APPENDIX A
POWELL INDUSTRIES, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
A-1
POWELL INDUSTRIES, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
TABLE OF CONTENTS
1. Purpose..................................................... A-3
2. Effective Date of Plan...................................... A-3
3. Administration.............................................. A-3
4. Dedicated Shares............................................ A-3
5. Grant of Options............................................ A-3
6. Eligibility................................................. A-3
7. Option Grant Size and Grant Dates........................... A-3
8. Option Price; Fair Market Value............................. A-4
9. Duration of Options......................................... A-4
10. Amount Exercisable.......................................... A-4
11. Exercise of Options......................................... A-4
12. Non-Transferability of Options.............................. A-5
13. Termination of Directorship of Optionee..................... A-5
14. Requirements of Law......................................... A-5
15. No Rights as Stockholder.................................... A-6
16. No Obligation to Retail Optionee............................ A-6
17. Changes in the Company's Capital Structure.................. A-6
18. Termination and Amendment of Plan........................... A-8
19. Written Agreement........................................... A-8
20. Indemnification of Committee................................ A-8
21. Forfeitures................................................. A-9
22. Gender...................................................... A-9
23. Headings.................................................... A-9
24. Governing Law............................................... A-9
A-2
POWELL INDUSTRIES, INC.
NON-EMPLOYER DIRECTOR STOCK OPTION PLAN
1. Purpose. The Powell Industries, Inc. Non-Employee Director Stock Option
Plan (the "Plan") of Powell Industries, Inc. (the "Company") is for the benefit
of members of the Board of Directors of the Company (the "Board"), who, at the
time of their service, are not employees of the Company or any of its
affiliates, by providing them an opportunity to become owners of the Common
Stock of the Company (the "Stock"), thereby advancing the best interests of the
Company by increasing their proprietary interest in the success of the Company
and encouraging them to continue in their present capacity.
2. Effective Date of Plan. The Plan, as amended and restated, is effective
January 18, 2002, having been approved by the Board and the stockholders of the
Company.
3. Administration. The Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). Subject to the terms of the Plan, the
Committee shall have the power to grant Options to Eligible Directors, construe
the provisions of the Plan, Options, and Stock issued hereunder, to determine
all questions arising hereunder, and to adopt and amend such rules and
regulations for administering the Plan as the Committee deems desirable;
provided, however, that the actions and decisions taken by the Committee in its
capacity as administrator of the Plan shall not be effective until submitted to
and ratified by the Board.
4. Dedicated Shares. The total number of shares of Stock with respect to
which Initial Grants and Annual Grants (collectively, the "Options") may be
granted under this Plan shall not exceed, in the aggregate, 100,000 shares;
provided, that the class and aggregate number of shares of Stock which may be
granted hereunder shall be subject to adjustment in accordance with the
provisions of Paragraph 17. The shares of Stock may be treasury shares or
authorized but unissued shares of Stock. In the event that any outstanding
Option shall expire or is terminated or canceled for any reason, the shares of
Stock allocable to the unexercised portion of that Option may again be subject
to an Option or Options under the Plan.
5. Grant of Options. All Options granted under the Plan shall be
Nonqualified Options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended.
6. Eligibility. The individuals who shall be eligible to receive Options
under the Plan shall be each member of the Board who is not an employee of the
Company or any affiliate of the Company ("Eligible Director").
7. Option Grant Size and Grant Dates.
Annual Grants -- If shares of Stock are available for issuance under the
Plan, on a date established by the Committee, each Eligible Director who is
continuing to serve as a director after such date, shall receive a grant of an
Option to purchase the 2000 shares of Stock at the Fair Market Value of the
Stock on the date of grant (an "Annual Grant").
Initial Grants -- If an Eligible Director is first elected or appointed to
the Board (whichever is applicable), after the date of the immediately preceding
Annual Grant but before the date chosen for the next Annual Grant, the Eligible
Director shall be granted an Option to purchase the number of shares of Stock
A-3
(rounded to the nearest whole share) which is determined my multiplying 2,000
shares by a fraction, the numerator of which is the number of months served
actually served by the Eligible Director until the date of the next Annual Grant
and the denominator of which is 12. The exercise price of such Stock shall be
the Fair Market Value on the date of grant (an "Initial Grant"). The intent of
this initial Grant is to provide the new Director with a prorated Option for the
partial year served before the Annual Grant.
If the General Counsel of the Company determines, in his sole discretion,
that the Company is in possession of material, nonpublic information about the
Company or any of its subsidiaries, he may suspend granting of the Initial Grant
and Annual Grant to each Eligible Director until the second trading day after
public dissemination of the information, and the determination by the General
Counsel that issuance of the Options is then appropriate.
8. Option Price; Fair Market Value. The price at which shares of Stock may
be purchased by each Eligible Director (the "Optionee") pursuant to his Initial
Grant and each Annual Grant, respectively, shall be 100% of the "Fair Market
Value" of the shares of Stock on the date of grant of the Initial Grant and each
Annual Grant, as applicable.
For all purposes of this Plan, the "Fair Market Value" of the Stock as of
any date means (a) the average of the high and low sale prices of the Stock on
that date on the principal securities exchange on which the Stock is listed; (b)
if the Stock is not listed on a securities exchange, the average of the high and
low sale prices of the Stock on that date as reported on the NASDAQ National
Market System; (c) if the Stock is not listed on the NASDAQ National Market
System the average of the high and low bid quotations for the Stock on that date
as reported by the National Quotation Bureau Incorporated; or (d) if none of the
foregoing is applicable, the average between the closing bid and ask prices per
share of stock on the last preceding date on which those prices were reported or
that amount as determined by the Committee.
9. Duration of Options. The term of each Option shall be seven (7) years
from the date of grant. No Option shall be exercisable after the expiration of
seven (7) years from the date the Option is granted.
10. Amount Exercisable. Each Option granted hereunder shall be exercisable
in full after the first anniversary of the grant of the Option.
11. Exercise of Options. Options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised, together with: (a) cash, certified check,
bank draft, or postal or express money order payable to the order of the Company
for an amount equal to the option price of the shares, (b) Stock (held by
Optionee for at least six months) at its Fair Market Value on the date of
exercise, and/or (c) any other form of payment which is acceptable to the
Committee, and specifying the address to which the certificates for the shares
are to be mailed. As promptly as practicable after receipt of written
notification and payment, the Company shall deliver to the Eligible Director
certificates for the number of shares with respect to which the Option has been
exercised, issued in the Eligible Director's name. If shares of Stock are used
in payment, the Fair Market Value of the shares of Stock tendered must be less
than the option price of the shares being purchased, and the difference must be
paid by check. Delivery shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Eligible Director, at the address specified
by the Eligible Director.
A-4
Whenever an Option is exercised by exchanging shares of Stock owned by the
Optionee, the Optionee shall deliver to the Company certificates registered in
the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates, (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition.
12. Non-Transferability of Options. Options shall not be transferable by
the Optionee other than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.
13. Termination of Directorship of Optionee. If, before the date of
expiration of the Option, the Optionee shall cease to be a director of the
Company, the Option shall terminate on the earlier of the date of expiration or
one (1) year after the date of ceasing to serve as a director. In this event,
the Optionee shall have the right, prior to the termination of the Option, to
exercise the Option if he was entitled to exercise the Option immediately prior
to ceasing to serve as a director, however, in the event that the Optionee has
ceased to serve as a director on or after attaining the age of seventy (70)
years, the Optionee shall be entitled to exercise all or any part of such Option
without regard to any limitations imposed pursuant to Paragraph 10, provided
that in no event shall the Option be exercisable within six months after the
date of grant.
Upon the death of the Optionee while serving as a director, his executors,
administrators, or any person or persons to whom his Option may be transferred
by will or by the laws of descent and distribution, shall have the right, at any
time prior to the earlier of the date of expiration of the Option or one (1)
year following the date of his death, to exercise the Option, in whole or in
part without regard to any limitations imposed pursuant to Paragraph 10,
provided that in no event shall the Option be exercisable within six months
after the date of grant.
14. Requirements of Law. The Company shall not be required to sell or
issue any Stock under any option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable state or regulation relating to the registration
of securities, upon exercise of any Option, the Company shall not be required to
issue any Stock unless the Company has received evidence satisfactory to it to
the effect that the holder of that Option will not transfer the Stock except in
accordance with applicable law, including receipt of an opinion of counsel
satisfactory to the Company to the effect that any proposed transfer complies
with applicable law. The determination by the Company on this matter shall be
final, binding and conclusive. The Company may, but shall in no event be
obligated to, register any Stock covered by this Plan pursuant to applicable
securities laws of any country or any political subdivision. In the event the
Stock issuable on exercise of an Option is not registered, the Company may
imprint on the certificate evidencing the Stock any legend that counsel for the
Company considers necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of an Option, or the issuance of shares under it, to comply
with any law or regulation of any governmental authority.
A-5
15. No Rights as Stockholder. No Optionee shall have any rights as a
stockholder with respect to Stock covered by any Option until the date a stock
certificate is issued for the Stock, and, except as otherwise provided in
Paragraph 17 hereof, no adjustment for dividends, or otherwise, shall be made if
the record date thereof is prior to the date of issuance of such certificate.
16. No Obligation to Retain Optionee. The granting of any Option shall not
impose upon the Company or its stockholders any obligation to retain or continue
to retain any Optionee or nominate any Optionee for election to continue in his
capacity as a director of the Company. The right of the Company, the Board, and
the stockholders to terminate the service of any Optionee as a director shall
not be diminished or affected by reason of the fact that one or more Options
have been or would be granted to him.
17. Changes in the Company's Capital Structure. The existence of
outstanding Options or Stock Awards shall not affect in any way the right or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalization, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Stock or its rights, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment the payment of a stock dividend, or other increase or
reduction of the number of shares of the Stock outstanding, without receiving
compensation for it in money, services or property, then (a) the number, class,
and per share price of shares of Stock subject to outstanding Options under this
Plan shall be appropriately adjusted in such a manner as to entitle an Employee
to receive upon exercise of an Option, for the same aggregate cash
consideration, the equivalent total number and class of shares he would have
received had he exercised his Option in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares of Stock then
reserved to be issued under the Plan shall be adjusted by substituting for the
total number and class of shares of Stock then reserved, that number and class
of shares of Stock that would have been received by the owner of an equal number
of outstanding shares of each class of Stock as the result of the event
requiring the adjustment.
If while unexercised Options remain outstanding under the Plan (i) the
Company shall not be the surviving entity in any merger, consolidation or other
reorganization, (or survives only as a subsidiary of an entity other than an
entity that was wholly-owned by the Company immediately prior to such merger,
consolidation or other reorganization), (ii) the Company sells, leases or
exchanges or agrees to sell, lease or exchange all or substantially all of its
assets to any other person or entity (other than an entity wholly-owned by the
Company), (iii) the Company is to be dissolved, or (iv) the Company is a party
to any other corporate transaction (as defined under Section 424(a) of the Code
and applicable Treasury Regulations) that is not described in clauses (i), (ii)
or (iii) of this sentence (each such event is referred to herein as a "Corporate
Change"), then (x) except as otherwise provided in an Option Agreement or as a
result of the Committee's effectuation of one or more of the alternatives
described below, there shall be no acceleration of the time at which any Option
then outstanding may be exercised, and (y) no later than ten (10) days after the
approval by the stockholders of the Company of such Corporate Change, the
Committee, without the consent or
A-6
approval of any Optionee, shall act to effect one or more of the following
alternatives, which may vary among individual Optionees and which may vary among
Options held by any individual Optionee:
(1) accelerate the time at which some or all of the Options then
outstanding may be exercised so that such Options may be exercised in full
for a limited period of time on or before a specified date (before or after
such Corporate Change) fixed by the Committee, after which specified date
all such Options that remain unexercised and all rights of Optionees
thereunder shall terminate,
(2) require the mandatory surrender to the Company by all or selected
Optionees of some or all of the then outstanding Options held by such
Optionee (irrespective of whether such Options are then exercisable under
the provisions of this Plan or the Option Agreements evidencing such
Options) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such
Options and the Company shall pay to each such Optionee an amount of cash
per share equal to the excess, if any, of the per share price offered to
stockholders of the Company in connection with such Corporate Change over
the exercise price(s) under such Options for such shares,
(3) with respect to all or selected Optionees, have some or all of
their then outstanding Options (whether vested or unvested) assumed or have
a new Option substituted for some or all of their then outstanding options
(whether vested or unvested) by an entity which is a party to the
transaction resulting in such Corporate Change and which is then, employing
him, or a parent or subsidiary of such entity, provided that (A) such
assumption or substitution is on a basis where the excess of the aggregate
fair market value of the shares subject to the Option immediately after the
assumption or substitution over the aggregate exercise price of such shares
is equal to the excess of the aggregate fair market value of all shares
subject to the Option immediately before such assumption or substitution
over the aggregate exercise price of such shares, and (B) the assumed
rights under such existing option or the substituted rights under such new
Option as the case may be will have the same terms and conditions as the
rights under the existing Option assumed or substituted for, as the case
may be,
(4) provide that the number and class of shares of Stock covered by an
Option (whether vested or unvested) theretofore granted shall be adjusted
so that such Option when exercised shall thereafter cover the number and
class of shares of stock or other securities or property (including,
without limitation, cash) to which the Optionee would have been entitled
pursuant to the terms of the agreement and/or plan relating to such
Corporate Change if, immediately prior to such Corporate Change, the
Optionee had been the holder of record of the number of shares of Stock
then covered by such Option, or
(5) make such adjustments to Options then outstanding as the Committee
deems appropriate to reflect such Corporate Change (provided, however, that
the Committee may determine that no such adjustment is necessary).
In effecting one or more of alternatives (3), (4) or (5) above, and except
as otherwise may be provided in an Option Agreement, the Committee, in its
sole and absolute discretion and without the consent or approval of any
Optionee, may accelerate the time at which some or all Options then
outstanding may be exercised.
In the event of changes in the outstanding Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Option and not otherwise provided for by this Section 17,
any outstanding Options and any
A-7
agreements evidencing such Options shall be subject to adjustment by the
Committee as to the number and price of shares of stock or other consideration
subject to such Options. In the event of any such change in the outstanding
Stock, the aggregate number of shares available under this Plan may be
appropriately adjusted by the Committee.
After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving corporation, each Employee shall be entitled to have his
Restricted Stock appropriately adjusted based on the manner the Stock was
adjusted under the terms of the agreement of merger or consolidation.
The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options
or Stock Awards.
18. Termination and Amendment of Plan. The Board may amend, terminate or
suspend the Plan at any time, in its sole and absolute discretion; provided,
however, to the extent required to qualify the Plan under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended, no
amendment shall be made more than once every six months that would change the
amount, price or timing of the Initial and Annual Grants, other than to comport
with changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act or the rules and regulations promulgated
thereunder, and provided, further, to the extent required to qualify the Plan
under Rule 16b-3, no amendment that would (a) materially increase the number of
shares of the Stock that may be issued under the Plan, (b) materially modify the
requirements as to eligibility for participation in the Plan, or (c) otherwise
materially increase the benefits accruing to participants under the Plan, shall
be made without the approval of the Company's stockholders.
19. Written Agreement. Each Option granted hereunder shall be embodied in
written agreement, which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by the Chairman of the Board, the
Vice Chairman, the President or any Vice President of the Company for and in the
name and on behalf of the Company.
20. Indemnification of Committee. With respect to administration of the
Plan, the Company shall indemnify each present and future member of the
Committee against, and each member of the Committee shall be entitled without
further act on his part to indemnity from the Company for, all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Committee, whether or not he continues
to be a member of the Committee at the time of incurring the expenses. However,
this indemnity shall not include any expenses incurred by any member of the
Committee (a) in respect of matters as to which he shall be finally adjudged in
any action, suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of his duty as a member of the Committee,
or (b) in respect of any matter in which any settlement is effected, to an
amount in excess of the amount approved by the Company on the advice of its
legal counsel. In addition, no right of indemnification under this Plan shall be
available to or enforceable by any member of the Committee unless,
A-8
within 60 days after institution of any action, suit or proceeding he shall have
offered the Company, in writing, the opportunity to handle and defend same at
its own expense. This right of indemnification shall inure to the benefit of the
heirs, executors or administrators of each member of the Committee and shall be
in addition to all other rights to which a member of the Committee may be
entitled as a matter of law, contract, or otherwise.
21. Forfeitures. Notwithstanding any other provision of this Plan, if,
before or after termination of the Optionee's capacity as a director of the
Company, there is an adjudication by a court of competent jurisdiction that the
Optionee committed fraud, embezzlement, theft, commission of felony, or proves
dishonesty in the course of his advisory relationship to the Company and its
affiliates which conduct materially damaged the Company or its affiliates, or
disclosed trade secrets of the Company or its affiliates, then any outstanding
options which have not been exercised by Optionee shall be forfeited. In order
to provide the Company with an opportunity to enforce this Section, an Option
may not be exercised if a lawsuit alleging that an action described in the
preceding sentence has taken place until a final resolution of the lawsuit
favorable to the Optionee.
22. Gender. If the context requires, words of one gender when used in this
Plan shall include the others and words used in the singular or plural shall
include the other.
23. Headings. Headings are included for convenience of reference only and
do not constitute part of the Plan and shall not be used in construing the terms
of the Plan.
24. Governing Law. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
A-9
Front Side of Proxy
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POWELL INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 15, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Thomas W. Powell and Stephen W. Seale, Jr.,
and each of them, attorneys and agents with full power of substitution to vote
all shares of common stock of Powell Industries, Inc. which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of Powell Industries, Inc., to be held at the offices of Powell
Industries, Inc., 8550 Mosley, Houston, Texas, at 11:00 a.m. Houston time, on
March 15, 2002 and at any adjournment thereof, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF ALL NOMINEES
1. [ ] FOR the election (except as indicated below) to the Board of Directors,
class of 2005, of Eugene L. Butler and Ronald J. Wolny.
Instructions: To withhold authority to vote for an individual nominee,
write that nominee's names on the line provided below.
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[ ] WITHHOLD authority to vote for all nominees listed above.
(continued on reverse side)
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BACK SIDE OF PROXY
================================================================================
(continued from other side)
2. [ ] FOR the approval of the Powell Industries, Inc. Non-Employee
Directors Stock Option Plan as amended.
[ ] AGAINST such approval and amendment.
[ ] ABSTAIN with respect to such approval and amendment
3. In their discretion with respect to (1) any other matters as may properly
come before the meeting and any adjournment thereof, (2) approval of the
minutes of the prior meeting, if such approval does not amount to
ratification of the action taken at that meeting, (3) the election of any
other person as a director if a nominee named above is unable to serve or
for good cause will not serve, and (4) matters incident to the conduct of
the meeting.
If properly executed, this proxy will be voted as directed above.
IF NO DIRECTION IS INDICATED WITH RESPECT TO THE ABOVE PROPOSALS, THIS PROXY
WILL BE VOTED "FOR" THE BOARD OF DIRECTORS' NOMINEES AND FOR APPROVAL OF THE
POWELL INDUSTRIES, INC. NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
----------------------------------------------------
(PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN
WHICH SIGNING.)
DATED: , 2002
------------------------------
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE!
================================================================================